Barclays U.S. Portfolio Strategy Weekly: Riding the Skew
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Barclays U.S. Portfolio Strategy Weekly: Riding the Skew
Barclays analyst, Barry Knapp, said, "The U.S data this week was mixed. On the surface this doesn’t seem supportive of the latest rally in equities; however, inexpensive valuations and an elevated price for risk implied the data had to point to recession to prevent a near-term rally."
"The ECB reiterated its commitment to providing a backstop for dollar funding, leaving investors holding options with implied volatilities at or near 100% wondering whether 7% daily moves through December was a realistic assumption."'
"The case for another round of LSAP or yield capping is strengthening given the recent drop in long-term inflation breakevens. Still, hurdles are higher now given that the US dollar decline associated with the QE2 triggered a rise in commodities."
"If a disorderly Greek debt restructuring occurred (not our base case), we believe investors would expect S&P 500 earnings to drop to roughly $85 in 2012 and we would expect the PE multiple to drop to 10.7, pushing the S&P to 1020."
"Tactically, we remain cyclically positioned, favoring early- to mid-cycle sectors; however, we’re now neutral on two defensive sectors – we upgrade Telecom and downgrade Healthcare, both to Marketweight."
Barclays analyst, Barry Knapp, said, "The U.S data this week was mixed. On the surface this doesn’t seem supportive of the latest rally in equities; however, inexpensive valuations and an elevated price for risk implied the data had to point to recession to prevent a near-term rally."
"The ECB reiterated its commitment to providing a backstop for dollar funding, leaving investors holding options with implied volatilities at or near 100% wondering whether 7% daily moves through December was a realistic assumption."'
"The case for another round of LSAP or yield capping is strengthening given the recent drop in long-term inflation breakevens. Still, hurdles are higher now given that the US dollar decline associated with the QE2 triggered a rise in commodities."
"If a disorderly Greek debt restructuring occurred (not our base case), we believe investors would expect S&P 500 earnings to drop to roughly $85 in 2012 and we would expect the PE multiple to drop to 10.7, pushing the S&P to 1020."
"Tactically, we remain cyclically positioned, favoring early- to mid-cycle sectors; however, we’re now neutral on two defensive sectors – we upgrade Telecom and downgrade Healthcare, both to Marketweight."
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